Shanghai and Shenzhen to Lift Home Purchase Restrictions

(Reuters) – Top Chinese cities Shanghai and Shenzhen are planning to lift key remaining restrictions on home purchases to attract potential buyers and shore up their flagging real estate markets, according to four sources with knowledge of the matter.

Planned Changes

Under the planned changes:
– Potential buyers will no longer undergo eligibility vetting.
– Non-residents from other parts of China will be allowed to buy homes in these cities.
– Plans to remove limits on the number of homes one can purchase.

Both cities are expected to announce these changes soon, aligning with a trend among various Chinese cities that have abolished purchase restrictions over the last year to revive demand in the struggling sector.

All sources requested anonymity due to the sensitivity of the matter.

Neither the State Council Information Office nor the Ministry of Housing responded to media inquiries regarding this issue.

Historical Context

Shanghai and Shenzhen implemented home-buying restrictions as early as 2010 and 2011 to combat escalating house prices. The easing of these restrictions follows discussions among Chinese leaders focused on achieving a 5% economic growth target for 2024 and halting housing market declines, according to state media.

Recent Developments

The proposed changes signal further efforts by policymakers to mitigate the downturn in the real estate sector, which has heavily impacted China’s economy. This follows liquidity injections and interest rate cuts announced by the central bank to boost confidence.

China’s CSI 300 Real Estate Index saw gains, rising 8.28% after the report.

Broader Implications

Beijing is also contemplating lifting restrictions in most areas, but some districts will remain under restrictions. Since mid-2021, the property sector has faced a debt crisis, leading to massive defaults and financial pressure.

Previous relief measures have fallen short, as evidenced by the fastest decline in new home prices in over nine years in August, indicating further action is necessary.

Tier-one cities in China have historically imposed strict home purchase regulations for non-local buyers. However, recent relaxations in regulations have allowed more flexibility for buyers, including those who are divorced and those looking to upgrade homes.

Cities like Hangzhou, Jinan, and Qingdao have already lifted all home purchase limits, with Guangzhou being the first to relax limits on large properties as well.